Cost-neutral not free, says ASA

A brief history of “Free”. We regularly see ASA adjudications which underline the care that is needed when making “free” claims. Both the UK’s broadcast and non-broadcast advertising codes (the BCAP and CAP Codes) contain significant limitations on the use of this term, and it is easy for advertisers to fall into the trap of inadvertently making a misleading claim.

The rules in both codes state that marketing communications should not describe a product as free if a consumer has to pay anything other than the unavoidable cost of responding to the offer and collecting or paying for the delivery of the item.

The complained-about advert. In a ruling in September 2016, UK Energy Watch, a LED lighting replacement company, was pulled up by the regulator regarding a marketing email it had sent in June of the same year. An individual had complained about the offer on the basis of it being misleading because they understood that costs were payable.

What did the email say? (edited highlights)

The email had a subject line offering businesses “Fully Funded LED lighting”.

Following on from this, the body text claimed that the company could provide a “FREE replacement of the lighting across your office, property or estate, helping you to reduce your electricity bill by up to 80%”.

The email went on to describe this as being achievable with “ZERO capital outlay. There is no survey fee, no admin or setup costs. Free LED lighting is a fully funded flexible lease to suit your cash flow needs where you choose the term”.

Finally, the email stated “it costs you nothing. You never get a bill from us.”

What was actually being offered?The product offered by UK Energy Watch worked on the basis that the company would replace all the lighting of the customer with low-energy LED lightbulbs. The company did not charge the customer for this upfront. However we understand from the ASA’s report that the scheme instead required the customer to enter into a lease for the lightbulbs and installation, repayable to UK Energy Watch over a period of time (usually 5 years).

The report goes on to explain that such leases were structured so that monthly repayments were lower than the savings the customer would make on their monthly energy bills by having the low-energy LED bulbs installed. The example provided by UK Energy Watch was that repayments were generally set on average at two-thirds of the savings made (so, if a customer saved £300 on its bills gross each month by having the replacement bulbs, it would in effect be saving £100 net, with the other £200 of savings being accounted for in repayments to UK Energy Watch).

Does no outlay mean free?On the interpretation taken by the advertiser, it was appropriate to describe this scheme as “free”, as businesses were not required to make any capital outlay to participate, and the latter payments which were required to be made to UK Energy Watch would – according to the advertiser – be more than offset by the savings in the business’s electricity bills. Overall, therefore, the business saved money.

However, the ASA did not agree, and ruled that the ad was misleading and must not appear again in its current form.

What was the ASA’s reasoning?The regulator’s view was that the use of “free” in the ad simply did not comply with the definition in the advertising codes, as customers of UK Energy Watch were required to repay the cost of the installation over a set time period. Notwithstanding that the resulting savings on energy bills were likely to exceed the repayments, as a customer still had to “pay” the company, this meant the offer was not free.

The regulator also felt that the ad was insufficiently clear regarding the requirement to pay for the installation in monthly instalments. This conclusion is perhaps unsurprising, given that the advert’s text seems slightly m­­­uddled on this point: although from the ASA’s report the advert is described as mentioning “a fully funded flexible lease” it also was reported to contain a statement that “you never get a bill from us”, which, given that payments were required to be made to the advertiser appears to be more questionable.

Why this matters:

Narrow interpretation of “free”.Advertisers should note that the ASA applies the test as set out in the advertising codes when reviewing “free” claims and not any other test. Therefore, it is not likely to be appropriate to describe a product as free if the customer has to put their hand in their pocket at any point, even if it is possible to substantiate that an effect of the product you are offering will lead to an overall saving rather than a cost for your customer.

Keep an eye on eco-claims.Finally, while this did not come up as an issue in this adjudication, any businesses which see the government’s withdrawal of the official “Green Deal” initiative as presenting a gap in the market should remember that there are also specific rules around environmental claims under the UK advertising codes. Any advertising with an environmental flavour will of course also need to stay on the right side of these.